Interest Rate Swap

An agreement between two parties to exchange interest payments for a specific maturity on an agreed upon principal amount. The most common interest rate swap involves exchanging fixed interest payments for floating interest payments. An agreement to exchange interest payments for a specific period of time on a given principal amount. The most common interest rate swap is a fixed-for-floating coupon swap. The notional principal is typically not exchanged. Swap that combines the features of both a currency swap and an interest rate swap. It converts a liability in one currency with a stipulated type of interest payment into one denominated in another currency with a different type of interest payment.